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Facts
The assessee, engaged in trading Iron Steel, filed return of income for AY 2009-10. The AO, based on information about accommodation entries and non-genuine purchases, added 12.5% of the purported bogus purchases to the assessee's income. The CIT(A) upheld this addition.
Held
The Tribunal condoned the delay in filing the appeal. Considering the assessee's GP ratio and previous orders of coordinate benches, the Tribunal directed the AO to restrict the addition on alleged bogus purchases to 5% over and above the assessee's disclosed GP rate.
Key Issues
Whether the addition sustained by the CIT(A) on account of alleged bogus purchases, by applying a GP rate of 12.50%, is justified, and if not, what is the appropriate GP rate to be applied.
Sections Cited
147, 148, 143(3)
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Income Tax Appellate Tribunal, “J (SMC
Before: SHRI AMIT SHUKLA, JM &
Appellant /Assessee by : Shri Anuj Pandey, AR Revenue / Respondent by : Shri Asif Karmali, Sr. DR : 21.02.2025 Date of Hearing : 27.02.2025 Date of Pronouncement O R D E R
Per Padmavathy S, AM:
This This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC)- Delhi [for short 'the CIT(A)] dated 27.03.2024 for the AY 2009-10. The issue contended by the assessee through various grounds pertain to the addition sustained by the CIT(A) by applying the GP rate of 12.50% on the alleged bogus purchases.
The assessee is an individual and proprietor of Rakesh Trading Company which is engaged in the business of trading of Iron Steel. The assessee filed the return of income for AY 2009-10 on 19.09.2009 declaring a total income of Rs. 2,91,714/-. The AO received information from DDIT (Inv.) that the assessee has taken accommodation entries to the tune of Rs. 2,03,40,348/- and that the parties from whom the assessee has shown the purchases are found to be non-genuine by the Sales Tax Department. The AO called on the assessee to furnish various details with regard to the alleged bogus purchases. The AO after considering the submissions of the assessee held the entire amount as bogus and added 12.5% amounting to Rs. 25,42,544/- to the income of the assessee. On further appeal, the CIT(A) upheld the addition made by the AO. The assessee is in appeal before the Tribunal against the order of the CIT(A).
The assessee has filed a petition for condonation of delay stating that the assessee being a senior citizen was not aware of the fact that the appellate order for AY 2009-10 has been passed by the CIT(A) and that only when the assessee received the appellate order for subsequent years came to know on 10.06.2024 that the order for AY 2009-10 was passed on 27.03.2024. Accordingly the assessee prayed that the delay may be condoned and the appeal be admitted for adjudication. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167 ITR 471) (SC) we condone the delay filing the appeal and admit the appeal for adjudication.
We heard the parties and perused the material on record. The ld. AR submitted that considering the nature of business of the assessee the GP ratio of the assessee is in the range of 3.83% and the GP ratio of 12.5% as calculated by the AO is far higher. The ld. AR further argued that the assessee has discharged the onus of proving the genuineness of the transaction by submitting all the relevant documents and therefore, the AO is not correct in treating the impugned transaction as bogus. The ld. AR also submitted that in assessee's own case for AY 2010-11 and 2011-12 (ITA No. 3813 & 3814/Mum/2024 dated 30.09.204) where a similar addition has been made, the Co-ordinate Bench has held 5% to be the GP to be applied on the alleged bogus purchases. The relevant observations of the Co- ordinate Bench in this regard are extracted as below:
“7. We have heard the parties and perused the material available on record. We are only concerned with the computation of gross profit rate as claimed by the parties, hence, without going into the merits of the case, we are inclined to decide the controversy with regard to the application of gross profit rate only. The judgment of the Hon’ble Jurisdictional High Court in the case of PCIT vs. M/s. Mohommad Haji Adam & Co. (ITA No.1004 of 2016 dated 11.02.2019) is landmark judgment, wherein the Hon’ble High Court has held that addition should be restricted to gross profit rate on such kind of purchases. The aforesaid judgment of the Hon’ble Jurisdictional High Court has respectfully been followed by the co-ordinate Bench of the Tribunal in the case of Pavan Steel India, Mumbai vs. ITO-19(2)(5), Mumbai decided on 28.06.2024 , wherein the Assessee also dealt with the ferrous and non-ferrous metals as involved in the instant case and the Hon’ble Co-ordinate Bench of the Tribunal by considering other judgments as well, directed the AO to apply 5% gross profit rate over and above the gross profit disclosed by the Assessee on the alleged bogus purchases. We further observe that the co-ordinate Bench of the Tribunal in the case of Kailash Judhistir Sahu vs. CIT-38, Mumbai decided on 10-10-2023 also dealt with the identical case, wherein the addition was restricted @ 12.5% by the Ld. Commissioner, however, the Tribunal by considering the peculiar facts and circumstances of the case in totality, restricted the addition @ 6% of the alleged bogus purchases. Hence, considering the peculiar facts and circumstances in totality and respectfully following the judgments referred to above, in our considered view, justice would be met by restricting the addition from 12.5% to 5% only on the alleged bogus purchases of Rs.2,10,94,976/- over and above the gross profit rate disclosed by the Assessee on the alleged bogus purchases. Hence, the AO is accordingly directed to consider the addition @ 5 % of the alleged bogus purchases, over and above gross profit rate shown by the Assessee and re-compute the tax liability. In the result, the instant appeal filed by the Assessee stands partly allowed.”
During the course of hearing the revenue did not bring any material on record to controvert the submission that the facts for the year under consideration are identical and did not bring any material to support that the GP rate applied in assessee's case is not correct. Therefore, respectfully following the above decision of the Co-ordinate Bench in assessee's own case, we direct the AO to consider the addition at 5% of the alleged bogus purchases over and above the GP rate shown by the assessee and re-compute the tax liability accordingly.
In result, the appeal of assessee is partly allowed.